Payroll systems redefine in-house efficiencies

Corporates have needed to become much more efficient in recent years. With that, payroll systems have become much more fluid, and far more advanced.

Payroll systems play a crucial part in the operation of any firm. From keeping track of employee pay, bonuses, pension payments, and tax contributions, their use in modern organisations has become much more apparent in recent years.

In the UK, HMRC requirements also need to be considered. Records of payslips, pension contributions, taxable benefits, and national insurance payments need to be generated on a regular basis – and often upon request. Those firms who don’t rely on sophisticated payroll solutions are at threat of exposing themselves to penalties for late filings – aside from the detriment in internal efficiencies.

In recent years, firms have benefited from advances on the tech side of things: developments in application programming interfaces (APIs), payment aggregators, and real-time accounting capabilities have expanded the use cases of payroll-only platforms to organisational management systems. With the shift to new technology, payroll has moved from a back-office function to a company-wide services provider – and leading vendors provide automated, cloud-based solutions.

“Today, many accountants, payroll bureaus and small business owners manage payments to employees and suppliers,” said Myles Stephenson, chief executive of Modulr – the business payments platform. “This process can be highly manual and involve insecure file transfers between different software solutions and systems. Accountants and payroll bureaus that manage this process on behalf of several clients and across multiple bank accounts find this manually intensive process time-consuming and error prone.”

The problem is particularly acute for third parties receiving payroll instructions. For Modulr, the opportunity to bring new technology to the market is ripe.

“There was a gap in the market, and that was a lack of automation. The fact that the end customer or the accountancy firm has to deal with that manual process – which is inefficient and time-consuming – could lead to data and security issues, and also not being able to reconcile by easily getting back the data from the bank to the accounting platform or the payroll platform,” said Stephenson, when commenting on Modulr’s market proposition.

Modulr’s innovative technology opens new avenues for SMEs. The API sandbox allows developers to tailor software specifically to needs, empowering Modulr clients to make changes directly or harmonise with existing software. A must for firms in finance, straight-through-processing (STP) is the standard when making payments. Modulr can automate payments and is a member of CHAPS, Bacs, Faster, and SEPA payment schemes. Further integrating into existing payment networks, Modulr is also adding SWIFT and MasterCard payment systems.

Stephenson was speaking while announcing a new partnership with Sage, the business software industry leader.

“Modulr brings significant industry expertise that offers us the opportunity to expand the capabilities of our solution with new functionality and geographies, together with specific support for the development of our partner channels,” explained Seamus Smith, executive vice president, global payments & banking at Sage, of the new alliance.

Called Sage Salary and Supplier Payments, the new offering will give SMEs the ability to take charge of payments and the opportunity to move away from traditional banks.

“Our Payments as a Service API platform enables our partners to quickly and easily integrate new payment services into their core products,” said Stephenson. “Our innovative partnership with Sage will enable SMEs to address the significant burden created by existing inefficient payment processes. Our fully integrated service provides a fast, easy and reliable alternative to processing payments via traditional business and corporate banking.”

Sage Salary and Supplier Payments will be offered to Sage customers, who are already using their payroll, HR, account, or payment services.

As well as the second payments services directive (PSD2), Europe-based firms must also consider the data security provided by the platform and how it integrates with their internal data protection policies and procedures. This is especially important now, following the implementation of GDPR (EU General Data Protection Regulation).

“Being able to pay employees and suppliers on time is an essential part of business,” said Sage’s executive, Smith.

Taking stock of business necessities and growth plans, in addition to the availability of new technologies, is key when considering the type of payroll system required. While many firms still operate payroll software systems in a silo, SMEs looking to optimise processes can expect automation, transparency, and data analysis.

Commenting on technology and Sage’s capabilities, Smith further adds that: “Customers and accountants will further benefit from real-time visibility of payments, seamless reconciliation of payment data into Sage’s Accounting and Payroll products and role-based access controls, meaning that they can track and manage a full audit trail of activity pertaining to incoming and outgoing payments, which will give them full control of a crucial part of their business.”

An “attractive offering housed under a single platform”

Modulr’s payment technology when combined with Sage’s business enterprise systems is an attractive offering housed under a single platform. Stephenson notes that “Sage Salary and Supplier Payments, powered by Modulr, means Sage customers can now open as many payment accounts as they want. They can also make payments whenever they want, 24/7, 365 days of the year. There’s no longer a need to switch between different software applications to get the job done.”

“By enabling our SME customers and accountant partners to automate vital financial processes directly from our products, we can exceed their expectations. This will help them to save time on administrative processes, take control of the flow of money through the software, improve data security and reduce costs,” says Smith.

Strategic partnerships, like that established between Modulr and Sage, stand to capture more market share together by shaping innovation in the payroll space, while crucially supporting SMEs. Looking forward, the flexibility – while improving automation – may indeed edge out traditional suppliers of payroll and HR software.

In 2020, instant payments look set to continue their current trajectory to become the biggest trend in payments. While these schemes already offer numerous benefits to corporates, leveraging innovations such as APIs and request to pay will go some way to unlocking their full potential, argues Michael Knetsch